It Will Now Cost You 0.75% To Save Money In Denmark: Danish Central Bank Cuts Rates For FOURTH Time In Three Weeks

Tyler Durden's picture

It has become a weekly thing now. In its desperation to preserve the EURDKK peg, the Danish central banks has cut rates into negative, then cut them again, then again last week, and moments ago, just cut its deposit rate to negative one more time, pushing NIRP from -0.5% to -0.75%, its fourth "surprise" rate cut in the past 3 weeks!

From the press release:

Effective from 6 February 2015, Danmarks Nationalbank's interest rate on certificates of deposit is reduced by 0.25 percentage points to -0.75 per cent. The lending rate, the discount rate and the current account rate remain unchanged at 0.05 per cent, 0.0 per cent and 0.0 per cent, respectively.

 

The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market.

 

Following the decision by the Swiss National Bank to discontinue the minimum exchange rate and the decision by the European Central Bank to launch an expanded asset purchase programme, there has been a considerable inflow of foreign currency.

 

The traditional monetary policy instruments of the fixed exchange rate policy are interventions in the foreign exchange market and influencing the interest rate spread relative to the euro area. Danmarks Nationalbank's interventions in the foreign exchange market amounted to kr. 106.3 billion in January and the rate on certificates of deposit has been lowered several times. Additionally, the Ministry of Finance has decided to suspend the issuance of domestic and foreign bonds until further notice, based upon the recommendation of Danmarks Nationalbank. These measures have been taken with the intention to inhibit the inflow of foreign exchange.

 

"The fixed exchange rate policy is an indispensable element of economic policy in Denmark – and has been so since 1982. Danmarks Nationalbank has the necessary instruments to defend the fixed exchange rate policy for as long as it takes", says Lars Rohde.

 

Lars Rohde continues: "There is no upper limit to the size of the foreign exchange reserve. The sole purpose of the monetary policy instruments is maintaining a stable krone exchange rate against the euro. The revenue of Danmarks Nationalbank is positively affected by the increase of the foreign exchange reserves."

And all this even after Denmark launched bizarro QE when instead of adding to Treasury demand, Denmark decided to boost prices of long-dated bonds by cutting all supply indefinitely. Looks like that strategy failed less than a week after its launch.

The good news is that all those who still haven't gotten the epic deal of getting paid to take out a Danish mortgage, are one step closer. And the other news is that with every passing rate cut, Denmark essentially admits it is one step closer to pulling an SNB, facing reality and admitting it can no longer peg to the EUR.

The kneejerk reaction in the EURDKK is higher...

... but we doubt it will last more than a few minutes.

Update (30 seconds later)

It wasn't "a few minutes" - it was "seconds."

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Haus-Targaryen's picture

Just break the peg and be done with it.  

y3maxx's picture

...Skimming Danish citizens bank savings to pay for upcoming Greek Loans loss/writeoff.

max2205's picture

Sign at Danish bank

We don't want your money

Haus-Targaryen's picture

The Danish are going to learn what a bitch compounding can be, and soon.  

Lets hope they can grasp this concept -- as the concept of "opportunity cost" is completely lost on the Germans.  

aPlayer's picture

I especially like this part:

"Danmarks Nationalbank has the necessary instruments to defend the fixed exchange rate policy for as long as it takes", says Lars Rohde.

 

I think I've heard it before. 

RaceToTheBottom's picture

Only two ways to go:
Swiss or
Danes

EscapeKey's picture

I believe the Danes are already the biggest contributors to the disaster that is the EU on a per-capita basis.

noben's picture
noben (not verified) y3maxx Feb 5, 2015 12:01 PM

Bullish for Madras* Bank.

* Madras=Mattress

ps. Saving at NIRP is an oxymoron, designed for obedient serf morons.

Dubaibanker's picture

Denmark will eventually need to break the peg and bow to the QE tsunami coming from EU which will keep weakening the EUR and strengthening every other currency at their own cost.

The day the central bankers in Denmark understand the above, they will hit their forehead on the wall! Unlike the Swiss, Danes dont have a lot of foreign banking assets so they will last a bit longer.

After Denmark it will be HKD where deposits are rising very rapidly and the peg will come under pressure.

But the ultimate appreciation will happen to the Chinese yuan....

Watch Peter Schiff from a few days ago.

China to Follow in SNB's Footsteps, Yuan to Soar

 

This research from Stanchart bank is also quite good. With trade demand approaching 22% of all trade of China settled in yuan, the demand is simply exploding. Hence, the yuan must appreciate, the only question is when will the Govt let it happen?

https://www.sc.com/en/resources/global-en/pdf/Research/2015/20150107-RGI...

Again another good article from Germany just today: 

Sieren's China: The rapid rise of the yuan

 

JRobby's picture

Ho Hum where's the RUM

Oh, I meant to say RUN

PANIC!

Groundhog Day's picture

Cant wait for them to take 75% and let you keep 25%

venturen's picture

"THEY" already do that...look at your total taxes and the crooks on Wall Street take

silverer's picture

You were almost right.  They take 75%, and you keep 25% - 0.75%. 

Philo Beddoe's picture

 

Bbbbbut...gold has no yield. Paying for liquidity and faith I suppose. 

SHEEPFUKKER's picture

Things keep getting nirpier and nirpier. 

vote_libertarian_party's picture

The US should charge negative 99% interest on Treasuries!!!

 

Balance the budget lickity split!!!!!!!!!

Bill of Rights's picture

LMAO= FAIL! John Kerry rated worst secretary of state in 50 years

 

http://www.marketwatch.com/story/john-kerry-rated-worst-secretary-of-sta...

Colonel Klink's picture

Yeah but I heard he won it by a nose.

stateside's picture

And yet the barbaric relic keeps losing value day after day.  Interesting init?  I wonder why that is?  Keep stacking.

 

stateside

nodhannum's picture

That all depends on the currency one is trading in, doesn't it.  I think if you ask a Russian, a Venezeulian, an Argentine or a Cariocan, you might get a different answer.

LawsofPhysics's picture

more importantly, are they paying anyone to take out a billion dollar loan?

tick tock...

silverer's picture

Come to think of it, maybe Greece should declare their loans "negative loans", in which case, ECB has to write them a check instead.

Tsar Pointless's picture

And humans are considered to be an advanced species.

Right. Pull this finger.

clade7's picture

LEGO my EGGO.

Nobody saves any money in Denmark...non-story...

yogibear's picture

Just a matter of time before they just outright steal 50% of it, then the other 50%.

silverer's picture

I have a question.  Wouldn't it be more environmentally responsible just to take the negative amount of interest stated at the bank, and instead of depositing your money, just shred the proper amount of it corresponding to the bank's rate for tomorrow's newsprint?  You can stay home and save gas!  (In fact, if they keep this up, you might as well just stay home, period)!

FrankieGoesToHollywood's picture

If you are one of the few who have money to save AND if you live in a safe area, you are correct.  But if you lived in say, somolia, not so much.  The banks security advantage may be worth the fee (negative interest).

gladih8r's picture

Danish Central Bank to their populace:  "We are going to keep taking more and more of your money until you fuckers start spending already.  Don't have any money left, well, hey, you can always borrow some at this low, low introductory rate......"

clade7's picture

"Denmark is a very windmilly and mermaidy place"

Pat McManus (sort of)

tawdzilla's picture

Long fireproof safes

FrankieGoesToHollywood's picture

I am not against a negative banking rate IF it was not a fractional reserve bank.  There should be a charge to safeguard your money.  But due to fractional reserve banking, the general public has determined they should be paid for the bank to hold/secure our property (positive rate).

As far as negative rate loans, well thats just a irrational fear of deflation.

rum_runner's picture

You're still describing a 0% interest world.  My money should have time value to the BANK and, consequently, they should pay me for access to it so that they can make loans.  But, lol, I want honest politicians too.

FrankieGoesToHollywood's picture

That only works with fractional reserve banking; which is what created the problem.  For a bank to allow you access to your money, they have to keep it in reserve, they cant loan it out (to maintain on demand deposit access). To do this, I would expect a bank to charge a fee since how else will they make money?  For money the bank chooses to loan out, they will need to deny the depositor access for a period of time.  For this, i would charge rent (interest).

But to have it both ways the bank needs to be "lent long, borrowed short" (fractional reserve).

 

Junkers, I suggest you educate yourselves on banking 101.

 

Buster Cherry's picture

At this point the only reason to have a bank account would be to cash your paycheck.

More junk silver please......

silverer's picture

If I write you a check out of my corporate checking account for $25., and you take it to my bank to cash it, they will charge you $10.00 to cash that check if you don't have an account in the bank.  I found this out when I walked in to cash a check I had written to myself for reimbursement of petty cash (the teller didn't know I had an account).  I'm glad I found out before any of my customers.  Nice deal, eh?  What bank is that? Santander (a part of that fancy Spanish bank that's doing so well /sarc).

silverer's picture

So much for the Socialist Paradise narrative I keep reading from trolls, that holds these countries up as an example of perfected Nirvana.  What can be more perfect than going backwards?  Are they heading toward "The good old days?".  Maybe that's it, yeah.  That's it, nyuk, nyuk.

Dr_Snooz's picture

I'm curious how much longer they think they can keep this up before they inspire a run of depositors to pull all their money out? This NIRP business looks like a clever way to instigate a run on your entire banking system. These guys are completely suicidal.

Its_the_economy_stupid's picture

and those w mortgages payable in  Euro's are about to gett a big present

czarangelus's picture

How does this even help the situation? Why won't everybody just get their money from the bank and hoard it under their mattress rather than immediately running out and spending their life savings?

StandardDeviant's picture

They will.

However, right now the negative rate doesn't apply to retail deposit accounts. Negative interest rates are paid by

  • institutional investors, such as hedge funds, who have unutilised cash in amounts much too large to put under a pillow,
  • organizations such as pension funds whose charter may require them to hold a certain percentage of their assets in gov't bonds, no matter what the rate,
  • currency speculators who don't care about the rate but are counting on currency appreciation (probably not the case here), or
  • serious bears who would prefer to lose a small amount on their cash than to risk it in any other asset.

It'd be very surprising to see any retail bank charging customers for deposits, as people would just hoard it under their mattress, as you said.  Most likely they'd simply jack up other service charges instead.

Then again...

Oldwood's picture

It is good that I'm not in the markets as I fail to understand anything about them. We are witnessing every government on the planet desperately trying to create inflation at the same time they are trying to sell negative to no interest debt into the marketplace, in some cases into the decades in term. Talk about divergences, how the fuck is this supposed to work. If interest rates do rise due to any success creating inflation, what will happen to the value of the shit notes that pay nothing or even cost to own? If we actually deflating and returns on investment are measured in relative negativity, where in the hell does that leave the rest of the world...you know.. they ones who live from actual working for a living rather than gambling?

rum_runner's picture

Details, details..  you old fuddy-duddies don't understand how the new normal works.  The Fed buys up bad investments and all is well.

overmedicatedundersexed's picture

what is the definition of a bail in? corzine has given them all a lesson in how to grab wealth and laugh at justice.

silverer's picture

Jon's best friend was Bill Clinton, and a roughly 50/50 blend of Congress, that repealed Glass-Steagall.  That repeal allowed the banks and institutions to gamble with depositor's money in addition to their own money.  Corzine was off the hook before he even pulled that stunt.